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IIMA INDIA Research and publications increases impulse buying behavior by consumers (Mattila and Wirtz 2001). Similarly, by varying the level of pleasantness experienced in an in-store environment, retailers can significantly influence the willingness of customers to spend time in the store and their likelihood of spending more money than originally planned (Donovan et. al. 1994). Grocery stores often design their shelf placements to encourage customers to behave in a desired manner. For example, many grocery stores place frequently purchased items like milk on shelves at the rear of the store, so as to increase consumers’ exposure to other products displayed at the front of the store. The physical context that a firm can alter is not limited to retail environment or location. Consider the design of a consumer product’s packaging. The work of Wansink (1996) suggests that by simply increasing the package size of a consumer product, a firm can increase the consumption level of the product. Similarly, product placements in movies may be used by firms to form or change viewers’ beliefs about, say, the appropriateness of using a product in a particular situation (e.g., having red wine with white meat). Decision context setting behaviors aim to drive markets by reframing a market player’s decision rules – i.e., encouraging a player to focus on certain considerations or attributes it otherwise would have ignored, or to pay greater (or lesser) attention to considerations than would have been ‘normal,’ or to reverse the valence associated with an attribute from positive to negative (or vice versa). In this regard, consider the use of low-cost “meaningless attributes” by firms to achieve real differentiation in the minds of consumers (Carpenter, Glazer and Nakamoto 1994). Folger’s coffee may have been differentiated through the use of a patented process to form ‘flaked coffee crystals’ and the use of advertising that implies but does not state that the flaked crystals improve taste. In fact, the shape of the coffee crystal is irrelevant for instant coffee because the crystal simply dissolves in the water. (The shape, however, is relevant for ground coffee because greater surface area exposed during brewing extracts more flavor.) Similarly, a firm can change market players’ decision rules in favor of attributes on which it is strong, thereby influencing the behavior of the players in the firm’s favor. For example, a low-cost firm may try to encourage customers to pay a disproportionate emphasis on pricing as a consideration, and lead to favorable purchasing behavior. Price advertising can successfully be used by a firm to W.P. No. 2013-05-07 Page No. 12
IIMA INDIA Research and publications increase consumer price sensitivity (Kaul and Wittink 1995), as several low-cost airlines have demonstrated. When price comparisons are not easy, firms can create perceptions of greater price cuts through frequent but small price cuts (Alba et. al. 1999) In some cases, a firm can attempt to reverse the valence associated with an attribute from positive to negative or vice versa. For example, causerelated advertising has been used to reverse ‘customer’ preferences and behavior (e.g., smoking cessation and safe sex). Finally, a third form of decision context setting entails altering the legal and regulatory constraints under which market players must operate. Altering laws and regulations impacts market players’ decision-making process, thereby altering their behavior. For example, multinational firms often lobby to alter government trade policies (Yoffie and Milner 1988). Such efforts can, for example, effectively increase or reduce market entry and exit barriers for market players (Farell et al. 1992; Varadarajan, Clark and Pride 1992). Contractual Announcements Firms use deliberate announcements as cues to inform (and elicit reactions from) market players (Harvey, Lusch and Richey 2002). Contractual Announcements refer to announcements made by a firm about its impending contractual arrangements such as distributor agreements, licensing, and acquisitions. Senior managers spend a fair amount of time on the signals they send out to a market because of their potential impact (Harvey, Lusch and Richey 2002). As noted earlier, contractual arrangements such as alliances and licensing can potentially affect the structure and behavior of a market. Announcements about impending contractual arrangements can help a firm to accelerate the intended changes in market structure or behavior (Hultink and Langerak 2002; Lilley and Walters 1997). For example, a firm may wish to grow a market by licensing its technology to a large number of players including competitors and complementors. By announcing its intention to license its technology to all interested, a firm can accelerate interest in its technology, predispose players favorably to the technology, as well as dissuade other players from investing in rival technologies. W.P. No. 2013-05-07 Page No. 13
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